How will Congress pay for the payroll tax cut extension?
December 17th, 2011
01:58 PM ET
10 years ago

How will Congress pay for the payroll tax cut extension?

Washington (CNN) - The $33 billion bill passed by the Senate on Saturday, which extends the payroll tax reduction and other items by two months, will be offset by an increase in fees that new homeowners with federally-backed mortgages will pay to Fannie Mae, Freddie Mac and the Federal Housing Administration.

Those entities would then turn that money over to the U.S. Treasury.

The increase would amount to about $15 per month for every $200,000 loaned, Senate aides estimated. Those fees would last for the lives of those loans in order to pay for the two-month extension, they said.

Lawmakers on the deficit reduction "super committee" first considered this revenue source as a way to reduce the budget deficit.

It was adopted to pay for the payroll tax cut bill – which also includes an extension of unemployment benefits and an increase in fees paid to doctors who treat Medicare patients – because it has broad bipartisan support on Capitol Hill and is supported by President Barack Obama.

They like it because Washington policymakers want to lower taxpayer exposure to bad loans now that the federal government has taken over Fannie and Freddie. Those entities currently back about 9 out of 10 mortgages in the country and therefore are at great risk for expensive defaults, the aides said.

The idea is that if the fees are raised for federally-backed mortgages, it should make it easier for private mortgage companies to compete against them. That is, in part, because the private companies generally have to charge more for their services than Fannie and Freddie, as private companies don't have the advantage of being backed by the government, aides explained.

Filed under: Congress • Fannie Mae • Senate • Taxes
soundoff (19 Responses)
  1. GI Joe

    They'll turn the money over to the Treasury? Or lobbyists (Gingrich, et al)?

    December 17, 2011 02:15 pm at 2:15 pm |
  2. Rick McDaniel

    They will tax anything they can find, sooner or later.

    December 17, 2011 02:18 pm at 2:18 pm |
  3. barbara

    They instantly, literally overnight find billions for wars, but nothing for people in this country in need.
    Millions of Americans are now in poverty, millions of children go to bed hungry every night in the
    United States, and Congress ignores these FACTS. They also find the money over night to give
    themselves pay increases, but again nothing for those in need. Every single Republican should be
    forced to live on an unemployment check for one month – they could not survive a day!

    December 17, 2011 02:19 pm at 2:19 pm |
  4. B.Ray

    Great! Just what we need to suppress the housing market even further. That means suppressed jobs, depressed housing market, and more foreclosures. Who are these clowns?

    December 17, 2011 02:28 pm at 2:28 pm |
  5. J Stuart

    Finally the GOP found a way "raising taxes" loophole. Instead of "raising taxes" they simply call it "raising fees" and that's OK with them. So let's now raise fees on the wealthiest 1%

    December 17, 2011 02:28 pm at 2:28 pm |
  6. Ray

    Just what we need. To pay for these we further depress the housing market, depress the job market, and increase foreclosures. Who are these clowns?

    December 17, 2011 02:30 pm at 2:30 pm |
  7. Jeff

    So someone wanting to buy a new home next year will end up paying an extra $1800 over the life of a 30 year mortgage in exchange for two months worth ($170) of tax reductions now? It's a good thing there wasn't an agreement for the entire year. Why do people taking out the loans and buying the homes have to pay extra fees to banks to keep banks from making bad loans? Maybe the banks went to Congress and said "OK, if you're not going to let us lend money to people who can't pay it back anymore, at least let us charge more fees to the people who can pay their mortgages".

    December 17, 2011 02:38 pm at 2:38 pm |
  8. RobK

    This two month extension, should it not be extended, would be a major headache for businesses, since it will require changing payroll systems in the middle of the year. Last year's change caused enough problems.

    December 17, 2011 02:39 pm at 2:39 pm |
  9. Sooner79

    "The increase would amount to about $15 per month for every $200,000 loaned, Senate aides estimated. Those fees would last for the lives of those loans in order to pay for the two-month extension, they said." 30 years home buyers will have to pay for this two month extension. Sounds like home byers just got hoses again.

    December 17, 2011 02:42 pm at 2:42 pm |
  10. SM

    Whats the rationale for providing tax break earlier last year to new home owners and now that we have to continue encouraging homeowners, we are adding new taxes.. Wonderful Capitol Hill, you just cannot have your friends at the Wall Street pay for it, can you?

    December 17, 2011 02:46 pm at 2:46 pm |
  11. Annie, Atlanta

    We certainly won't be paying for it by taxing the protected class, you know those millionaire and billionair job creators who got those extra special bonus tax breaks while we were at war in 2 countries (and which, by the way, our current President extended so that the jobless could eat). But like Ed Schultz said in a commercial I saw the other day, "where are the jobs?"

    December 17, 2011 03:17 pm at 3:17 pm |
  12. Donkey Party

    So the GOP shifted the burden onto the middle-class. Shocker. I thought the GOP said tax cuts pay for themselves? And people wonder why Americans despise the GOP so much.

    December 17, 2011 03:26 pm at 3:26 pm |
  13. Ban KKiller

    What happened to the story about the SEC filing charges against Mr. Daniel Mudd formerly of Fannie Mae and now ruining Fortress Investment Group?

    December 17, 2011 03:28 pm at 3:28 pm |
  14. Ken

    Once again the middle class is taking the hit. How in hell can Obama and the Democrats be pleased with this bill?

    December 17, 2011 03:32 pm at 3:32 pm |
  15. The Greedy Old Pigs have declared class war on US!

    Two thirds of America and over half of the 1%ers want it paid for by ending the Bush tax cuts for the filthy rich and adding the millionaire's surtax. Yet the GOBP deathcult refuses to follow this virtual mandate from the entire nation. This is all you need to know that the GOBP deathcult is just a front for a very un-American and hidden group of elites who have manipulated and corrupted our government and our economy,

    December 17, 2011 03:33 pm at 3:33 pm |
  16. Jon R

    I'm in the market to buy a new home however this should help slow down new home purchases to include ours.

    December 17, 2011 04:03 pm at 4:03 pm |
  17. Northener

    Good – we've got a ton of people who can't make their mortgage payment so let's get some money from those taking out new mortgages. Now who said that are reps aren't smart?

    December 17, 2011 04:10 pm at 4:10 pm |
  18. Odin

    oh–good a tax I will not pay

    December 17, 2011 04:15 pm at 4:15 pm |
  19. Josh

    This doesn't make any sense to me? If I'm looking at these basic numbers right, a person who finances a $500k home has to now pay about $37.50 a month. This tax break comes out to about $35 a month for most people. How is this better than taxing 1% of the population 2% of all money earned above $1 million? How come the Bush Tax Cuts for the wealthy didn't have these kind of conditions? How come republicans didn't worry about how those were paid for. Instead they just threatened to shut down the government. They weren't worried about the deficit then? How come we don't analyze republican actions instead of taking them for their words? Lots of questions.....

    December 17, 2011 04:19 pm at 4:19 pm |